Just Energy Group Inc. (“Just Energy” or the “Company”) (TSX:JE;
NYSE:JE), a retail energy provider specializing in electricity and
natural gas commodities and bringing energy efficient solutions and
renewable energy options to customers, today announced the
conclusion of its strategic review and a comprehensive plan to
strengthen and de-risk the business, positioning the Company for
sustainable growth as an independent industry leader. Highlights
include:
- Significant improvement to the
Company’s financial flexibility and liquidity as a result of a
proposed recapitalization plan (the “Recapitalization”) that will
be facilitated through a plan of arrangement (the “Plan of
Arrangement”) under the Canada Business Corporations Act (“CBCA”),
which involves a raise of C$100 million in committed new equity,
reduction of overall debt by approximately C$275 million, and
materially lower annual cash interest payments
- Support for the Recapitalization
from senior lenders and commitment to underwrite the C$100 million
equity subscription offering from existing senior unsecured term
loan lenders, Sagard Credit Partners, LP and certain funds managed
by a leading US-based global fixed income asset manager (the
“Initial Backstoppers”)
- A renewed slate of seven directors,
of which at least four will be new directors, will stand for
election to the Company’s Board at the Company’s Annual General
Meeting of shareholders, which is postponed from the August 11,
2020 date previously set, in conjunction with a Special Meeting for
approval of the Plan of Arrangement
- Business as usual for employees,
customers and suppliers in their relationship with a strengthened
Just Energy
“This comprehensive plan to strengthen and
de-risk our business will result in a much stronger Just Energy,
creating a sustainable capital structure and allowing our team to
focus on driving our business and serving our clients,” said Just
Energy’s President and Chief Executive Officer, R. Scott Gahn.
“This is the culmination of an extensive process
that saw us explore many options for the future of Just Energy,
which led us to the determination that by taking these actions now
we can position Just Energy for a bright future as an independent
leader in the business of providing energy to consumers,” Mr. Gahn
added.
The Recapitalization includes:
- Exchange of C$100 million 6.75%
subordinated convertible debentures due March 31, 2023 (TSX:
JE.DB.D) and C$160 million 6.75% subordinated convertible
debentures due December 31, 2021 (TSX: JE.DB.C) (the “Subordinated
Convertible Debentures”) for new common equity;
- Extension of C$335 million credit
facilities by three years to December 2023, with revised covenants
and a schedule of commitment reductions throughout the term;
- Existing senior unsecured term loan
due September 12, 2023 (the “Existing Term Loan”) and the remaining
convertible bonds due December 31, 2020 (the “Eurobond”) shall be
exchanged for a New Term Loan due March 2024 with initial interest
to be paid-in-kind and new common equity;
- Exchange of all 8.50%,
fixed-to-floating rate, cumulative, redeemable, perpetual preferred
shares (JE.PR.U) (the “Preferred Shares) into new common
equity;
- New cash equity investment
commitment of C$100 million;
- Initial reduction of annual cash
interest expense by approximately C$45 million; and
- Business as usual for employees,
customers and suppliers enhanced by the relationship with a
financially stronger Just Energy – they will not be affected by the
Recapitalization.
In total, the Recapitalization will result in a
reduction of approximately C$535 million in net debt and preferred
shares.
The Recapitalization Transaction will be
implemented in part through the Plan of Arrangement.
The implementation of the Recapitalization is
expected in September 2020, pending court and securityholder
approvals required under the CBCA, as well as applicable approvals
by the Toronto Stock Exchange. Just Energy’s Board of Directors has
approved the Recapitalization and unanimously recommends all
holders of existing subordinated convertible debentures, preferred
shares and common shares support the Recapitalization. Just
Energy’s financial advisor, BMO Capital Markets, has provided an
opinion to Just Energy’s Board of Directors that the terms of the
Recapitalization are fair, from a financial point of view, to the
holders of its Eurobond, Subordinated Convertible Debentures,
Preferred Shares, and common shares.
The Company has obtained a preliminary interim
order from the Ontario Superior Court of Justice which, among other
things, grants a limited stay of proceedings and establishes the
record date for voting of securityholders with respect to the Plan
of Arrangement as July 8, 2020. The Company will be seeking an
interim order in the very near term.
The Company also intends to file an information
circular describing the transaction in detail in the near term, and
expects to seek approval for the proposed Plan of Arrangement at a
Special Meeting of Shareholders and meetings of applicable creditor
classes (collectively, the “Meetings”) to be scheduled for late
August. The Company will also postpone its Annual General Meeting
from August 11, 2020 to the same date, enabling it to be held in
conjunction with the Special Meeting.
The Company’s full slate of director candidates
for its renewed board will be included in the forthcoming
information circular for the Special and Annual General Meeting of
shareholders. The size of the Board will be fixed at seven
directors, of which at least four will be new directors and with a
separate Chair and CEO.
Details of the Recapitalization and Plan of
Arrangement
The Plan of Arrangement
Pursuant to the Plan of Arrangement, the common equity in the
plan (before the common equity subscription opportunity) will be
allocated as follows:
Existing Instrument |
Allocation of Common Equity In the Plan (Prior to New Equity
Subscription Opportunity) |
Existing Term Loan and Eurobond |
5.0% |
Subordinated Convertible Debentures |
56.7% |
Preferred Shares |
9.5% |
Common Shares(1) |
28.8% |
1. Includes securities in employee equity
plans.
Further details of the Plan of Arrangement
include:
- The plan will also include a
1-for-33 share consolidation
- A total of 16.5 million common
shares will be outstanding as “Common Equity in the Plan” (prior to
the New Equity Subscription Opportunity)
- Upon closing of the plan, accrued
and unpaid interest to June 30, 2020 on the 6.75% subordinated
convertible debentures due March 2023 shall be paid in cash
- Interest following June 30, 2020 on
the Subordinated Convertible Debentures will not be paid in cash
and will be exchanged for new common equity under the Plan of
Arrangement.
- Interest to June 30, 2020 on the
6.75% subordinated convertible debentures due December 2021 was
already paid in cash on that date in accordance with the terms of
that debenture
- The Existing Term Loan and Eurobond
will be replaced with a new US$205.9 million senior unsecured term
loan due March 2024 (the “New Term Loan”, described further
below)
- Holders of the Existing Term Loan
representing 96% of the class have committed to vote in favour of
the transaction
New Term Loan
Key features of the New Term Loan include:
- Interest will be paid in kind until
March 31, 2022, following which interest may be partially paid in
cash
- The interest rate will be 10.25%
for any interest paid in kind and 9.75% for any interest paid in
cash
- The payment/prepayment fee has been
reduced to 5% for principal repayments at all times at or prior to
maturity
- Holders of Eurobonds will receive,
in addition to the share-related amounts set out in the table
below, US$952.38 of New Term Loan for every US$1,000 of principal
amount of Eurobonds they hold, subject to applicable laws
Extended Credit Facility
Concurrent with the implementation of the Plan of Arrangement,
the Company’s secured credit facility will be amended, including as
follows:
- Maturity date to be extended from
September 1, 2020 to December 31, 2023
- Scheduled mandatory repayments to
permanently reduce the facility availability over the term of the
agreement by an aggregate of C$245,000,000
- Amended financial covenants that
reduce the maximum consolidated senior debt to EBITDA ratio over
time
The New Equity Subscription Opportunity
- Holders of record of the Company’s
Existing Term Loan, Eurobond, Subordinated Convertible Debentures,
Preferred Shares and common shares as of July 23, 2020 will be
entitled to participate in the new equity subscription opportunity
(the “New Equity Subscription Opportunity”) in the amounts
specified below
- A total of 29.3 million new common
shares will be available for subscription pursuant to the New
Equity Subscription Opportunity at a price per share of
C$3.412
- The New Equity Subscription
Opportunity is non-transferrable and there will be no listed market
for the Subscription Opportunity
- The Initial Backstoppers have
entered into a US$73 million backstop commitment (equivalent to
C$100 million at an exchange rate of US$0.73 per C$1.00)
- The Initial Backstoppers will
receive 0.4 million common shares (after the Recapitalization Plan
and New Equity Subscription Opportunity have closed) as an Initial
Backstop Commitment Fee
- The Company may terminate the
initial backstop commitment on or prior to July 18, 2020 if
additional backstoppers are identified for at least C$100 million
on terms that are superior to the initial backstop commitment
- Under terms of Initial Backstop
Agreement, the Company may contract with additional backstoppers
(the “Additional Backstoppers”) for up to C$50 million of the
Backstop commitments by July 23, 2020. Alpha-IR will direct any
enquiries with respect to Additional
Backstop participation
- Backstop Funding Fee of 0.5 million
common shares (after the Recapitalization Plan and New Equity
Subscription Opportunity have closed) will be provided on a pro
rata basis to Initial/Additional Backstoppers in proportion to
their Backstop commitment amount
- The backstop commitments are
subject to a minimum amount of shares being offered to backstoppers
at the subscription price. If that minimum threshold
(US$20.35 million) is not achieved, the Company shall issue
additional Shares, to be purchased at the subscription price, to
fulfill the remaining minimum obligation.
- Completion of the New Equity
Subscription Opportunity is conditional on the completion of the
Recapitalization Plan
- The common shares issuable pursuant
to the New Equity Subscription Opportunity will be freely tradeable
and the Company will apply to list these shares on both the Toronto
Stock Exchange and the New York Stock Exchange (other than any
common shares issued to the Initial/Additional Backstoppers in the
United States, which will subject to U.S. resale restrictions)
A detailed description of the New Equity
Subscription Opportunity, including subscription mechanics and
deadlines, will be included in the information circular that will
be sent to stakeholders in connection with the Recapitalization
Plan. The subscription deadline is expected to be a date set
in August, 2020. Following completion of the Recapitalization Plan,
the New Equity Subscription Opportunity and the issuance of the
Initial Backstop Commitment Fee and Backstop Funding Fee shares,
approximately 46.6 million common shares will be issued and
outstanding.
|
|
|
New Equity Subscription Opportunity |
Existing Instrument |
Unit of Measure |
New Common Shares Received |
New Common Shares Available For Subscription |
Aggregate Purchase Price To Purchase Full Subscription |
|
|
(# of shares) |
(# of shares) |
(C$) |
Existing Term Loan |
Per US$1,000 |
3.801847 |
6.831439 |
$23.31 |
Eurobond |
Per US$1,000 |
3.801847 |
6.831439 |
$23.31 |
Subordinated Convertible Debentures |
Per C$1,000 |
35.920689 |
64.544948 |
$220.23 |
Preferred Shares |
Per 100 Preferred Shares |
33.387132 |
59.992466 |
$204.69 |
Common Shares |
Per 100 common shares |
3.030303 |
5.445072 |
$18.58 |
Stakeholder Support
In connection with the Recapitalization, the
Company has entered into a support agreement with all of its
lenders under the Existing Term Loan whereby such holders have,
among other things, agreed to support the Recapitalization. The
Company also entered into an amendment and consent agreement with
its senior secured lenders whereby such lenders have, among other
things, agreed to support the Recapitalization and extend the
facility maturity date to allow for the Recapitalization to be
completed.
Osler, Hoskin & Harcourt LLP and Fasken
Martineau DuMoulin LLP are acting as legal advisers to the Company
in Canada. BMO Capital Markets is acting as financial adviser to
the Company.
The Company intends to file with the U.S.
Securities and Exchange Commission a registration statement on Form
F-7 covering the distribution of the common shares issuable under
the New Equity Subscription Opportunity and commencement of the
offering of the common shares pursuant to the New Equity
Subscription Opportunity will occur following the effectiveness of
that registration statement.
This press release shall not constitute an offer
to sell, nor the solicitation of an offer to buy, any securities in
the United States, nor shall there be any offer, solicitation or
sale of securities mentioned in this press release in any
jurisdiction in which such offer, solicitation or sale would be
unlawful. The offering of the common shares issuable under the New
Equity Subscription Opportunity, which is expected to be launched
following the effectiveness of a registration statement relating to
the offering under the U.S. Securities Act of 1933, as amended,
will be made in the United States only by means of a prospectus
included in the registration statement.
Recapitalization and Fourth-Quarter
Results Conference Call and Investor Presentation
An investor presentation detailing the
Recapitalization will be posted to the Company’s web site.
The Company will host a conference call and live
webcast with R. Scott Gahn, chief executive officer, and Jim Brown,
chief financial officer, to discuss the announcements in this
release and to review the Company’s fiscal fourth quarter results,
released today in a separate news release. The conference call will
begin at 11:30 a.m. Eastern Time on July 8th, 2020.
Those who wish to participate in the conference
call may do so by dialing 1-877-501-3160 in the U.S. and Canada.
International callers may join the call by dialing 1-786-815-8442.
The Conference ID# is 9897748. The call will also be webcast
live over the internet at the following link:
https://edge.media-server.com/mmc/p/v54zs6sk
A webcasted replay for the call will also be
archived on the JE investor relations website a few hours after the
event.
About Just Energy Group
Inc.
Just Energy is a consumer company focused on
essential needs, including electricity and natural gas health and
well-being, such as water quality and filtration devices; and
utility conservation, bringing energy efficient solutions and
renewable energy options to consumers. Currently operating in the
United States and Canada, Just Energy serves residential and
commercial customers. Just Energy is the parent company of Amigo
Energy, EdgePower Inc., Filter Group Inc., Hudson Energy,
Interactive Energy Group, Tara Energy, and TerraPass.
Visit https://investors.justenergy.com/ to learn more.
Also, find us on Facebook and follow us
on Twitter.
FORWARD-LOOKING STATEMENTS This
press release may contain forward-looking statements. These
statements are based on current expectations that involve a number
of risks and uncertainties which could cause actual results to
differ from those anticipated. These statements are based on
current expectations that involve several risks and uncertainties
which could cause actual results to differ from those anticipated.
These risks include, but are not limited to, risks with respect to
raising new equity capital and the exchange of debt; the proposed
recapitalization transaction resulting in a financially stronger
Company; reducing the Company’s existing debt and interest expense
(including the amounts thereof); proceedings under the CBCA;
implementing a Plan of Arrangement; issuing new equity; the
allocation of any new equity; addressing certain obligations as
part of a proposed recapitalization transaction; risks associated
with the proposed recapitalization transaction, including the
inability to complete a proposed recapitalization transaction or
complete a proposed recapitalization transaction in a timely or
efficient manner; the inability to reduce the Company’s debt and/or
interest payments, proceedings under the CBCA; issuing and
allocating new equity including the dilution of the Company’s
outstanding common shares; the value of existing equity following
the completion of a recapitalization; the impact of the evolving
COVID-19 pandemic on the Company’s business, operations and sales;
reliance on suppliers; uncertainties relating to the ultimate
spread, severity and duration of COVID-19 and related adverse
effects on the economies and financial markets of countries in
which the Company operates; the ability of the Company to
successfully implement its business continuity plans with respect
to the COVID-19 pandemic; the Company’s ability to access
sufficient capital to provide liquidity to manage its cash flow
requirements; general economic, business and market conditions; the
ability of management to execute its business plan; levels of
customer natural gas and electricity consumption; extreme weather
conditions; rates of customer additions and renewals; customer
credit risk; rates of customer attrition; fluctuations in natural
gas and electricity prices; interest and exchange rates; actions
taken by governmental authorities including energy marketing
regulation; increases in taxes and changes in government
regulations and incentive programs; changes in regulatory regimes;
results of litigation and decisions by regulatory authorities;
competition; the performance of acquired companies and dependence
on certain suppliers. Additional information on these and other
factors that could affect Just Energy’s operations, financial
results or dividend levels are included in Just Energy’s annual
information form and other reports on file with Canadian securities
regulatory authorities which can be accessed through the SEDAR
website at www.sedar.com on the U.S. Securities and Exchange
Commission’s website at www.sec.gov or through Just Energy’s
website at www.justenergygroup.com.
Neither the Toronto Stock Exchange nor the New
York Stock Exchange has approved nor disapproved of the information
contained herein.
NON-IFRS MEASURES
The financial measures such as “EBITDA” do not
have a standardized meaning prescribed by International Financial
Reporting Standards (“IFRS”) and may not be comparable to similar
measures presented by other companies. This financial measure
should not be considered as an alternative to, or more meaningful
than, net income (loss), cash flow from operating activities and
other measures of financial performance as determined in accordance
with IFRS, but the Company believes that these measures are useful
in providing relative operational profitability of the Company’s
business. Please refer to “Key Terms” in the Just Energy Fiscal
2020 Annual Report’s management’s discussion and analysis for the
Company’s definition of “EBITDA” and other non-IFRS measures.
Neither the Toronto Stock Exchange nor the New
York Stock Exchange has approved nor disapproved of the information
contained herein.
FOR FURTHER INFORMATION PLEASE
CONTACT:
Jim BrownChief Financial OfficerJust Energy
713-544-8191jbrown@justenergy.com
or
InvestorsMichael CummingsAlpha
IRPhone: (617) 982-0475 JE@alpha-ir.com
MediaBoyd ErmanLongview
CommunicationsPhone: 416-523-5885berman@longviewcomms.ca
Source: Just Energy Group Inc.
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